Grim 2009 for Venture Capitalists December 29, 2008

Venture capitalists face a grim 2009 which had been predicted to be more challenging because of the worsening economic condition experienced worldwide, according to the latest survey conducted by National Venture Capital Association.

During the annual “prediction survey” conducted on Wednesday, the association said that some 400 US venture capitalists (VCs) surveyed between November 24 to December 12 were expecting that the coming year will be hard for businesses and its investors,

The survey revealed that ninety-two percent of venture capitalists believed that investment will drop by 10 percent or three billion in the coming year, a sharp decline from US$30 billion in recent years to US$27 billion in 2009.

The analysis also revealed that the coming year will be more challenging to startups and young companies as venture capitalists will allot more of their limited cash to their present companies.

Mark Heeson, president of the association, said they “think that 2010 will be better after a rotten 2009” adding that most of them remain optimistic despite the grim prediction for the coming year because it will only result to more startups after this challenging time had passed.

Because of the global economic slowdown, most venture capitalists see that the financial risks are too high, prompting them to halt many projects. This mentality is proven that only six companies in the US have gone public this year, compared to 86 startups in 2007, according to Heeson.

Heeson also said that most investors nowadays see the potential for clean and sustainable fuel and biotechnology industries because of the growing environmental awareness of most people.

Meanwhile, most investors believed that industries belonging from media, wireless communication, and semi-conductor will most likely to be hit as investments will experience sharp decline.